Should you pay for San Onofre bailout?

The decommissioning of San Onofre should not usher in a San Onofre ratepayer bailout for Southern California Edison (SCE) and San Diego Gas & Electric (SDGE). Will Rogers said, “Steal a million dollars from one person, and you’re a crook, but steal a dollar from a million people and you are a utility.” With the decision to decommission the nuclear reactors at San Onofre, we embark on two hazardous journeys, and both of them involve utility dollars and the public’s money.

First, we will have to determine how and where to dispose of San Onofre’s nuclear waste. The lethal nuclear waste will remain hazardous for thousands of years. President Obama’s Blue Ribbon Committee on America’s Nuclear Future, determined that nuclear waste should be stored in yet-to-be-determined “deep geological facilities.” The study unfortunately suggests that the costs be borne by ratepayers.

Second, we have to decide who will pay for the mistake SCE executives made when they installed the four defective steam generators at San Onofre beginning in 2011. So far, more than $2 billion has been charged to ratepayers for the failed generators and the costs of maintaining them after they were taken offline.

Under California utility law, SCE was supposed to present the costs to the California Public Utilities Commission (PUC) for a “reasonableness” review before the costs were permanently put into customer bills. SCE cleverly prevented the PUC-mandated review by not scheduling the required reasonableness hearing. The strategy worked. SCE has gotten away with charging ratepayers for the bungled plan since 2006.

Earlier this year the PUC granted ratepayer demands that it hold the required hearing and determine whether SCE and SDGE can charge ratepayers for the defective generators. However, the PUC postponed the hearing into the indefinite future. In the meantime the PUC has permitted the utilities to charge ratepayers for the defective steam generators and the costs of maintaining the San Onofre plant even though it has not produced any electricity since January 2012. If the PUC were making decisions based on the merits it could hardly find SCE and SDGE acted reasonably.

In the words of my law partner, and fellow advocate Maria Severson, “It’s like forcing you to make payments on a car that was never delivered.” SCE and SDGE have been able to add the ratepayer funds to their profits. or example, SCE shareholders have shared handsomely in SCE profits with over $2.7 billion in dividends since SCE began charging its ratepayers for the four replacement steam generators in 2006.

Who should pay should depend on whether SEC executives installed the defective generators in good-faith by accident, or whether they acted recklessly and in callous disregard for the welfare of ratepayers. To resolve this question ratepayers are entitled to a complete investigation. Sworn deposition testimony of the SCE executives must be allowed. The PUC must take up the issue of whether SCE should be allowed to put the San Onofre costs into rates permanently at the first opportunity.

Under the rule of law and the dictate of a capitalist economy, those who defy the law and disregard honest market practices must be held accountable. If SCE executives are found to have acted unreasonably when they decided to install the defective steam generators, SCE shareholders and not the ratepayers should pay. The current PUC Chairman — a former president of SCE — is calling for a “settlement.” No doubt a settlement is in order but it must be a settlement that is fair and reasonable to the ratepayers. Bad conduct should not be rewarded. Such costs should not be socialized onto the backs of the businesses and consumers who pay the utilities’ bills.

The PUC was chartered to protect ratepayers, but all too often it has protected utility profits at ratepayer expense. An aroused public must demand that the PUC meet its constitutional duties and decide who pays based on the rules.

California is already trying to overcome the claim it is unfriendly to business. Imposing a rate tax increase to bailout SCE and SDGE for the mistakes they made at San Onofre does not help. The public message to the PUC is unequivocal. They want no more bailouts funded with their hard earned money.

Aguirre is a former San Diego City Attorney and partner at the law firm of Aguirre, Morris and Severson. He is counsel for a party in the PUC San Onofre proceeding representing small business and nonprofit groups in San Diego